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HDFC Securities Institutional Equities
IT sector (coverage universe) growth is expected to bottom out in Q4 FY24 and recover ‘gradually' in FY25E. The slowdown in macro is still a baseline scenario and lower discretionary spending and slower conversion from total contract value to revenue is a feature and not a bug—at least in the near term—and deals will be focused on cost optimisation.
Growth divergence will continue within the sector and guidance for FY25E is likely to factor in improved H2 performance.
Maintain our selective stance on the sector—prefer TCS within tier-1s and Persistent Systems from mid-tier IT.
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